Javier Lendines, general manager of MAPFRE AM, the asset management arm of MAPFRE, a large insurance group in Spain and Latin America, discusses his outlook for 2024 and what to expect from markets.

After a complicated year in 2022 for all asset classes, marked by inflation, monetary tightening and economic weakening, Javier Lendines, general manager of MAPFRE AM, is optimistic about markets in 2024, after the year ended strongly. 

Lendines rules out a recession in 2024. According to the “Economic and Industry Outlook for 2023: fourth-quarter perspectives,” prepared by MAPFRE Economics, the group's research service, the growth forecast for the world economy in 2024 is 2.2 per cent; the group does not anticipate a recession even in its stressed scenario. “Although we will see a weakening compared to last year, it will remain in positive territory at all times,” he said in a note.

“Although we might see an economic slowdown, we continue to believe that the economy is healthy, the unemployment rate in Europe and the United States is low and, therefore, consumers keep consuming. We have a post-Covid pool of savings that has not yet dropped and, possibly, monetary policy will be somewhat more relaxed this year,” Lendines continued.

This scenario is favourable for equities, which could continue the bullish streak seen recently, he added. “We expect business results to continue to be positive in 2024, with improvements that could even be in the double digits for the year as a whole,” he said.

“Investors are therefore ruling out a scenario that we would describe as ‘idyllic’, which means widespread and excessive optimism for the time being, as some risks prevail,” Lendines added.

These risks are mainly related to geopolitics: analysts will continue to monitor how the conflicts in Palestine and Ukraine progress, combined with more than half the world going to the polls in 2024, José Luis Jiménez, MAPFRE group chief investment officer, added. The US elections are worth particular note, where there is a possibility that former President Donald Trump will be elected again.

Lendines believes that financial markets are “increasingly more complex,” which makes the work of analysts more difficult and decision-making more complicated. “For example, if you had asked any of us what would happen after a Hamas attack on Israel, we would have thought that the stock market would contract and oil prices would rise. Has that been the case? Not at all,” he said. “When it comes to forecasts, we have to keep this complexity in mind,” he added.

In turn, monetary policy is expected to be more relaxed in 2024, compared with the tightening we have seen over the past year and a half. The market seems to have forgotten the “higher for longer” message that central bankers have sent in recent months, and we are already looking at up to five rate cuts this year, Lendines continued.

At its last meeting of the year, the US Federal Reserve decided to maintain interest rates within the target range between 5.25 per cent and 5.5 per cent, as did the European Central Bank (ECB), where rates are between 4.5 per cent and 4.75 per cent.

Monetary policy
MAPFRE Economics believes that the scope for cuts in the United States is “clearer now than in September.” “Activity and employment have remained in remarkable shape, at the same time as inflation has continued to drop,” he said. However, the reality remains complex and the Research Service considers that it could be “too optimistic” to culminate between now and 2024 with the more than 150 basis points of cuts currently in the offing.

In the case of the ECB, the message is “more reflective,” with expectations of cuts cooling, as we head into 2024. The central bank has maintained its data-reliant stance, which for MAPFRE Economics leaves “some wiggle room.”

Despite this positive sentiment in the market, Alberto Matellán, chief economist at MAPFRE Inversión, noted that there is still a part of the monetary tightening that has not yet impacted the economy and that will do so in the coming months. “The road ahead is not going to be easy. Part of that impact is still pending,” he said. He emphasised that increases usually take between nine months and a year to affect the economy as a whole, although in this case they seem be taking longer.

The rate hikes that both central banks have been implementing have increased fixed income returns, which had taken a back seat for years as they were not sufficiently attractive against a backdrop of low rates. According to the latest report from MAPFRE Gestión Patrimonial for the month of December, November was the best month for this asset class since 2008. If there are no changes, it could be the star asset this year as well.

Regarding alternative assets, in which the group has been increasing investments for some years now, Lendines said that “they can help diversify portfolios, add profitability and offer good diversification in all senses,” warning of the danger of overreacting to movements in the market.